How Bloomberg Fabricates U.S. Housing Numbers 63 comments
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Being one of the most vigilant observers of the U.S. housing market – as well as one of the most vociferous critics of fraudulent “statistics”, there was little chance that Bloomberg's attempt to “rewrite history” would slip past me.
Here is what Bloomberg wrote on February 3rd of this year:
A record 19 million U.S. homes stood empty at the end of 2008...
Here is the new version of “history” which Bloomberg spewed out Thursday:
About 18.8 million homes stood empty in the U.S. during the third quarter...The record-high was in the first quarter [of 2009] when 18.95 million homes were vacant.
Unless the U.S. propaganda-machine has also re-written the rules of arithmetic, then the 19 million empty homes which Bloomberg reported for last year (in February) is a larger number than the 18.95 million which Bloomberg claimed was a record this year.
Admittedly, as far as statistical lies go, this particular example is hardly earth-shattering. However, what is important is it clearly established the fact that U.S. propagandists are simply inventing numbers when they report “statistics”.
The really important departure from reality is how Bloomberg (and the rest of the U.S. propaganda-machine) have simply ignored the millions of already-foreclosed properties which U.S. banks are hiding from the market.
As I demonstrated in “Fantasy Housing Numbers a Prelude for NEXT U.S. Housing Crash”, U.S. banks are on track to record close to 5 million foreclosures and repossessions – just in the current year. However, they are only on pace to sell about 1.5 “distressed properties” (which also include “short sales”). This simple arithmetic means that U.S. banks are adding at least 3.5 million empty homes to the millions of foreclosed properties they were already holding off the market prior to this year.
Obviously, if there were 19 million empty homes at the end of 2008, and at least 3.5 million more empty homes this year (just counting only those being held by U.S. banks), then the real total of U.S. empty homes today would be at least 22 million. Clearly, Bloomberg's claim of 18.8 million empty homes in the U.S. in the 3rd quarter of this year has absolutely no connection to the “real world”.
Presumably a major news organization like Bloomberg is able to keep track of its own prior published articles, which strongly suggests the deliberate attempt to deceive. Interestingly, Bloomberg's previous report on U.S. empty homes provides some data which strongly supports my assertion that U.S. banks have been accumulating vast quantities of foreclosed properties.
Bloomberg noted in February that at the end of the 3rd quarter of 2008 U.S. banks were holding $11.5 billion worth of foreclosed properties (in nominal value) – more than double what they held a year earlier. This doubling of the banks' inventories of foreclosed properties occurred during a year when there were 'only' 2.2 million foreclosures.
This year, U.S. banks are on pace to nearly double the total number of foreclosures from 2008 – yet all the reports from U.S. propaganda outlets indicate declining inventories of unsold homes, month after month.
This farce also extends to the new home market – except the fabrications are even more extreme. U.S. home-builders have been building roughly 50% more homes than they are selling, for every month for the last two years. This is why the U.S. propagandists never report “new home sales” and “new home starts” in the same article. Despite this horrendous discrepancy, and a long-term trend which can only end with mass-bankruptcies among home-builders, “inventories” of new homes have been reported as declining every month.
This sham just hit a new level of absurdity this week. When “new home sales” were reported this week, there was a “surprising” decline in the latest reading – and the previous month's number was revised lower. Yet in the same piece of propaganda it was reported that the inventory of new homes still supposedly declined in the last month.
Putting aside the huge, existing gap between new home starts and sales, one would think that the compulsive liars of the U.S. propaganda-machine would not have the audacity to report increasing “starts” of new homes, decreasing sales – and still claim that inventories were falling. Clearly this is nothing less than a "slap in the face" for market sheep - who are presumed to be so brain-dead that the propagandists can write 100% contradictory "facts" in the same article, and expect no one to notice.
Returning to the millions of foreclosed properties which U.S. banks are holding off the market, obviously part of the reason for this was to try to halt the collapse in housing prices. If U.S. banks had dumped an additional 5+ million homes onto the market (equal to a full year of demand by itself) then instead of the collapse in U.S. housing prices easing, it would still be accelerating.
However, as I pointed out in “Who OWNS Foreclosed U.S. Properties, Part II: the role of MERS”, there is a second reason for U.S. banks to hide all these millions of foreclosed properties: credit default swaps. This $50+ trillion market represents the phony “insurance” on the entire Wall Street Ponzi-scheme – which was the key to (so-called) “regulators” allowing the U.S. financial crime syndicate to leverage the entire financial sector by an utterly insane average of 30:1.
Now, with the U.S. housing market collapsing, these credit default swaps are being triggered. Selling these foreclosed properties locks-in the banks' losses – causing these massive obligations to come due. As I illustrated in “Bankster Sues Bankster – AGAIN”, in one example of a credit default swap, Citigroup (C) is suing Morgan Stanley (MS) to collect on this contract.
Even after the “collateral” which “backed” this insurance was liquidated, Morgan Stanley is still facing a pay-out of more than 300:1 based on the premiums it received for this insurance. While not every CDS will require 300:1 pay-outs, there is no reason that some of these payments could not exceed 300:1 – given the gross negligence of regulators in not requiring adequate collateral for this $50+ trillion “insurance market”.
If you take the billions in losses which U.S. banks are racking-up on foreclosed U.S. properties, and then start making 300:1 pay-outs on those losses, it doesn't take long for the entire U.S. financial system to appear hopelessly insolvent – even with the new, fraudulent accounting rules enacted in the U.S. in April.
For the benefit of new readers, I will repeat my warning: it is perilous to accept any U.S. government-reported statistics at “face value”. The absurd reading on 3rd-quarter GDP is a prime example.
The U.S. economy is supposedly now growing at a robust 3.5% annual rate. Wall Street is reporting “record profits” (and paying record bonuses). Yet the state of New York is desperately trying to close a $3 BILLION budget-gap – which has materialized over the same quarter where both Wall Street and the broader U.S. economy are supposedly thriving. Apparently Wall Street's fantasy "profits" are producing only fantasy tax revenues for the state of New York.
This entire Ponzi-scheme economy continues plunging toward collapse – and formal default on its massive, unpayable debts. Total public and private debt in the U.S. is now approximately $60 trillion, and this completely excludes the roughly $70 trillion in additional “unfunded liabilities” (for the federal government, alone). However, don't expect to hear the truth about this from the U.S. propaganda-machine.
Disclosure: I hold no position in Citigroup or Morgan Stanley
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On Nov 01 11:00 AM notsosmart wrote:
> this is interesting to me. i dont know this author.he calls wallst
> a ponzi scheme. i have been calling wall st a ponzi/casino scheme
> for years.he points out fraud/propaganda figures.what do you expect
> of a country that papers the world with phony rated AAA crap?what
> is it you expect of lying ceos & lying congress? presidents that
> lie(past & present)?self serving bods & accounting firms?
> a lack of ethics & transparency? a movie industry that tells
> you "greed is good"?contracts have become meaningless.every new law
> has the built in loopholes for the insiders.the whole system is a
> sad joke.unless someone can find a way to turn granite counters into
> oil this country is finished. your children & grandchildren will
> never pay off this debt.our free way of life is shrinking by the
> minute.cameras all over.credit card purchase tracking.ez pass &
> cell phone tracking.LOL out loud about the folks who talk about privacy.
> your every claim for your house,car, & drs visit is logged somewhere.now
> this author is worried about phony figures? too little too late.
The facts are what the Regime says they are; the truth is whatever glorifies the Regime; success is what most benefits the Regime.
Power, wealth, fame :all up for the WashDc-Wall St- MSM reigning Troika. This is called a great recovery made possible by the ever vigilant and tireless Regime laboring ceaselessly for The People.
Incomes, net worth, employment: all down for the Middle Class , which is as it should be and are the very substance of a recovery, since the middle class is made up of the very social deviants and enemies of The People the Regime so tirelessly warns us about.
There is a Recovery. The Regime has the statistics to prove it and every day ,in its indefatigable search for facts and in its unparalleled love for truth, it discover more, better and bigger statistics.
Only the statistics are real. Everything else is false: unpaid bills, foreclosures, small business bankruptcies, credit curtailments and denials...All fabrications of the remnant that clings to its primitive superstitionsof free markets, free speech, free elections and that biggest superstition of all: the Constitution.
On Nov 01 12:08 PM User 353732 wrote:
> You will recall that in Orwell's "1984" the absolute tyranny continually
> rewrote history so that the past would conform to the ideology and
> barbarities of the present. This is a defining trope of all corrupt,
> collectivist and depraved Regimes.
> The facts are what the Regime says they are; the truth is whatever
> glorifies the Regime; success is what most benefits the Regime.
>
>
> Power, wealth, fame :all up for the WashDc-Wall St- MSM reigning
> Troika. This is called a great recovery made possible by the ever
> vigilant and tireless Regime laboring ceaselessly for The People.
>
>
> Incomes, net worth, employment: all down for the Middle Class , which
> is as it should be and are the very substance of a recovery, since
> the middle class is made up of the very social deviants and enemies
> of The People the Regime so tirelessly warns us about.
>
> There is a Recovery. The Regime has the statistics to prove it and
> every day ,in its indefatigable search for facts and in its unparalleled
> love for truth, it discover more, better and bigger statistics.<br/>...
> the statistics are real. Everything else is false: unpaid bills,
> foreclosures, small business bankruptcies, credit curtailments and
> denials...All fabrications of the remnant that clings to its primitive
> superstitionsof free markets, free speech, free elections and that
> biggest superstition of all: the Constitution.
"strong dollar"
"recession is over"
and it goes on and on while GS and other investment banks rake in billions ......sad & diabolical.
They've paid off enough voters: Government employees, recipients of government checks, and enough sliced off who can't seem to get a clue, to top 50%. So, the largest ripoff in history proceeds, with the "recovery" we're experiencing now providing another pretend and extend, another bonus period, another bailout until taxpayers are the largest bagholders in history.
"Now, with the U.S. housing market collapsing, these credit default swaps are being triggered. Selling these foreclosed properties locks-in the banks' losses – causing these massive obligations to come due."
Are swaps and derivatives so confusing that the investor consensus assumes that all toxic assets have already been baked into the market outlook?
This is not a rhetorical question.
We witnessed subprime havoc and now it seems most asset manager types have this idea that the toxic assets were all bundled in with prime assets… since nobody knew what was what, and that everything as a whole has already been written down.
But I used to work on Wall Street, and I know that many asset managers are basically just sales guys who push what their analysts tell them to push, and that many analysts types are myopic materialistic ivy league model writers who are driven by peer pressure and perverse incentives to tow the company line.
I'm just a residential real estate guy... but it seems to scream out to me that the prime loans have not yet defaulted... so how could they already be discounted? The subprime assets weren't written down until people defaulted on making payments.
And I see now, with first hand experience, even while everyone is making the call that real estate has bottomed… that a major portion of non-performing loans that defaulted to date (I'd actually say the majority of them) have not yet been dealt with. The mark to market accounting change and the not so subtle short supply of inventory artificially created demand compared to same period last year results... but fundamentally nothing has even changed.
And now we are starting to see the 5yr i/o loans expiring and this bucket of loans is approximately 3 times LARGER than the subprime bucket… with average loan amounts that are LARGER than subprime... and even the same subprime neighborhoods are mostly comprised of hard working blue collar 5yr i/o holders who haven't even been tested yet... unless you count the test of still paying your mortgage on time even though you are earning about 30% less than before while debt payments that are higher than before… even though your deadbeat subprime neighbor walked AFTER getting a loan mod that you deserved but they received and then re-defaulted on because their credit was already shot, etc.
If the 5yr i/o pool is 3 times larger… and it’s not baked in yet… and the default rate is much greater than expected, though only by people who subjectively gauge and report the market’s expectations rather than looking at fundamental math and the recent blueprint that is called the subprime crisis… it seems that smoke and mirrors are perhaps the best chance we may have after all. It’s all starting to make sense now.
It will be accurate, however, when 70% fail their mods which will result in foreclosures surging likely over the near term. The question is...is there enough investor and first time buyer demand to sop it up. The big problem with housing right now is the mid to high end which has fallen off the same cliff as the broader market did in 2007 and is picking up speed on the way down.
and the worst of all these misrepresentations has been and will be a continued mistrust in large financial institutions by most regular people; this could take a lot of work and time to heal -
and, if our stats are bad, what are we to think of the chinese (or any other country whose data we can't begin to hardly analyze) reports?
but it's a two way street, i think - the average american will have to care enough and be willing to put enough effort into learning about the economy and finance, to force our own elected officials to give us the honest adult truth - something we could work from, for sustainability....
The economy is lucky that so many of the I/O mortgages use LIBOR as their index, so their adjusted rates are now lower than they were. If LIBOR was at 3.5% like a year ago then we would really be sunk!
Yes, LIBOR saves America... for the time being.
Second, I would think it would be in a bank's best interest to rent out, either to the former owners or somebody else, the homes they foreclose upon and try and wait for home prices to recover before putting them back on the market. If this is the case, would these homes be considered "empty"? Just asking.
Frankly, I think the tone of this article is a bit on the emotional side so that is why I'm questioning it.
The suggestion that there is some statistical inaccuracy in the Bloomberg article is laughable. The first reporter rounded off 18.95 to 19. There is no inaccuracy here, as any mathematician will tell you. The only difference is that the first reporter chose to use a lesser degree of precision than the second did, and the reason is obvious: The latter reporter was comparing the current number to the earlier number, and to accurately report the difference between the two, the numbers had to be cited with greater PRECISION, for if you round off 18.8 and 18.95, they both come to 19.
I'm not sure how anyone who doesn't get this can hope to provide meaningful financial analysis.
On Nov 01 12:41 PM Gary A wrote:
> I was thinking that the author may want to look into the retail sales
> numbers. I think those are fudged as well but how would we prove
> it?
If the world is going to end, I think I would rather not know it in advance but thanks for your research.
The 'Age of Great Abundance' as Peggy Noonan in the WSJ called it is over. However, she failed to state that this age was achieved for the past 20+ years by debt and not anything we really grew as we did in the 50s - early 80s when out trade exports were greater than our imports.
Let's face it ladies and gentlemen, our country is bankrupt and it took an almost fatal financial collapse to wake people up to see this and wake them up from their dreams of sugarplums and fairies - and guess what, most people I speak with are still clueless about the real state of our country and look upon the markets as if they were the Ten Commandments - if the markets are up everything must be OK in LaLa land.
I am clueless and often speechless as to how to get our country on a sound financial path and a REAL sustainable future.